Information on the estimated impact of extending the deadline of construction of the pipeline DN 700 Szczecin-Gdańsk, Phase II-IV on financial results of Stalprofil SA Group

The Board of Stalprofil SA informs that on 23 December 2014 it received information on forecasted by the management of the subsidiary ZRUG Zabrze SA negative impact of extending the deadline for completion of the contract for the "Construction of the pipeline DN 700 Szczecin-Gdańsk, Phase II-IV", on financial results of ZRUG Zabrze SA and, consequently, of Stalprofil SA Group for 2014.
Extending the original date of execution of the contract, signed on May 10 2012 between the consortium (the Contractor), composed of ZRUG Zabrze SA and Stalprofil, and Operator Gaz-System SA with its registered office in Warsaw (the Purchaser), with a general implementation of the investment under the name "Construction of the pipeline DN 700 Szczecin-Gdańsk: Phase II Karlino-Koszalin Koszalin Stage III - Słupsk and Stage IV Słupsk-Wiczlino" was justified by:
- the need to make changes in the design documentation,
- unforeseen difficulties of work carried out in difficult terrain,
- the need to perform additional works unforeseen originally to be performed under the task.
The total value of income from the performance of additional work that the date of publication of the report have been agreed and contracted with the Employer, increased revenues ZRUG Zabrze SA of this contract by the amount of 21,404 thousand PLN net. The current profitability analysis of the contract conducted by the management of ZRUG Zabrze SA shows, however, that this additional revenue did not offset higher costs resulting from the extension of the deadline of the contract and the need for additional work.
Changing the time schedule of the work, while the creation of deviations from the budget costs, led the final projected profitability of the contract is significantly lower than the previously calculated. Lowering the estimated profitability on the contract requires adjustment of the current financial result of ZRUG Zabrze SA, in accordance with IAS 11.
Estimates of the Board of Stalprofil show that predicted by ZRUG Zabrze SA decline in yields on the contract will reduce the Group's consolidated net profit for 2014 attributable to equity holders of the parent company by the amount of 10,822 thousand PLN.
Analysis of the profitability of the contract was drawn up in a safe variant, assuming that the occupancy permit and final inspection of the pipeline will take place by the end of the first quarter of 2015. Application for acceptance of the term was made by ZRUG Zabrze SA and is under consideration by OGP Gaz-System SA. The original deadline for the final acceptance was specified in the contract to 22 December 2014. On the date of the report sections of the pipeline in the Phase II Karlino-Koszalin Koszalin and Phase III - Słupsk passed the commissioning by OGP Gaz-System SA and are in the process of carbonation. Section of the pipeline at Stage IV Słupsk-Wiczlino is in the final stage of implementation.